Tour de France revenue sharing

onWednesday, 20 July 2011

The Tour de France is bigger than anything else in the sport, it’s the race everyone’s heard of. As such it’s in a monopoly position and able to dominate the sport.

At the same time others in the race are struggling. Garmin-Cervélo have taken four stages so far and held the yellow jersey but the team’s finances are always under review, the constant need to hunt for new sponsors whilst juggling a big wage will means a team manager’s job is often as much about fundraising as it is tactics.

Background
The Tour de France is run by Amaury Sport Organisation (ASO), a business that runs many other races as well as other sporting events like the Paris-Marathon, the French Open golf tournament and the Paris-Dakar rally. In turn ASO is owned by Éditions Philippe Amaury, a publishing group that prints L’Equipe, Le Parisien and other titles. EPA is family-owned, the majority shareholding owned by Marie-Odile Amaury (pictured). Her son Philippe runs ASO.

Accounts are hard to come by. In the Tour de France ASO earns income from TV rights but also from sponsorship and tops up by charging the towns along the route for the privilege of hosting the race. The race is reputed to be very profitable but there are significant costs too.

I understand the team’s desire for a slice of the cake. I’d like a slice of this too. But ASO is a business and very happy with the way things are right now, it won’t give away money for nothing. Indeed Jonathan Vaughters has said ASO believes “they could put on a race with amateur riders from France if necessary“. This is provocative from ASO and whilst one attraction of the race is that we see Alberto Contador, Cadel Evans, Philippe Gilbert, Mark Cavendish and others all together in a race, it is normally the race that creates the stories.

Cost sharing?
If teams want a share of TV rights in one race, some organisers who are struggling to cope with rising costs and an economic slump might look on with a touch of jealousy. Indeed if teams are willing to ask for money from the Tour de France, could more modest race organisers start asking for money from teams flush with cash? I can’t see that and several races are likely to vanish but it’s a way to point out that it’s not necessarily a one-way street.

Indeed revenues are already shared… between races. ASO runs a string of races during the year but supposedly loses money on them, although this seems impossible to verify. Races like Paris-Nice, the Dauphiné and the Tour de l’Avenir are essential to the sporting calendar and ASO seems to cross-subsidise them thanks to bumper receipts from the Tour de France. These events are platforms for teams to show themselves.

Sponsored by a bank

Teams in other sports can share money but only because they are permanent fixtures. In soccer Manchester United can host games in its stadium in front of almost 80,000 fans and it was founded in 1878. This permanence and the ability to host major games, coupled with some organisation, means teams in the English Premier League can command most of the TV rights.

By contrast in cycling it is the race organisers who “host” the sport, the teams show up because the airtime and other media coverage of the racing is very valuable.

Money never sleeps
But one lesson from the English Premier League is that any soccer clubs might have huge incomes from TV rights yet they are merely a conduit for the money: almost all of it flows to the players as wages get bid up in the auction for talent. Team managers asking for money in order to stabilise their finances would simply find more resources at their disposal to buy in star riders. In other words the money never sits still with the teams, bolstering their finances. Instead it would merely flow through the teams and inflate wages.

Alternative ideas
I can’t see ASO giving up money for the sake of helping the teams, especially if the money just flows into rider’s bank accounts. The spending wouldn’t achieve a return.

But there could be common ground for some enlightened sharing. Right now the teams pay a lot to support the bio-passport scheme but ASO derives a big benefit from cleaner sport. As such it would be good to see ASO agree to contribute to this cost, something Jonathan Vaughters seems to agree with.

Few sponsors
For me the real problem today isn’t ASO hogging the money, instead it’s a lack of sponsors. A spot in the Tour de France is incredibly valuable yet there aren’t many queuing up to back a team, even if they’re certain to get their money back in publicity. The payback can be several times the investment.

But look around at the teams and there aren’t that many global brands backing the sport:

Some teams are part-funded by sugardaddies (eg Leopard, BMC)

Some by family-owned businesses run by passionate fans happy to divert their marketing budget into a team (eg Lampre, Cofidis)

Others are ego projects for politicians and nations (Astana, Katusha)

Many others are funded by domestic sponsors who won’t gain much from international exposure (Ag2r, Euskaltel, Radioshack)

Arguably only HTC, Garmin, Quick Step and Sky have businesses across Europe.

Is this a professional sport or a hobby funded by men with ready access to money?

Summary
ASO certainly rakes in money from the Tour de France and this permanent and profitable franchise is a contrast to the ephemeral and often unprofitable business of running a team. No wonder teams want a share of this money.

But I can’t see ASO just doling out money for the sake of it, there would have to be something in return. I’m not sure if the money would stabilise anything, it could bring wage inflation which is great for the riders but the team owners don’t gain. Perhaps there are costs to be shared, for example the bio passport?

If teams want to stable finances then I think the ideas lie elsewhere. The real crisis is the lack of sponsorship money, big companies keen for media exposure are staying clear of pro cycling, in part thanks to the scandal-prone nature of the sport.

Perhaps a guaranteed invitation to the Tour de France, almost a franchise, because this will allow team owners to attract sponsors given the certainty of doing the big races. The UCI’s World Tour licencing scheme does this in a small extent but the terms and conditions keep changing. It’s this that turns teams into more stable propositions. But this system entrenches the existing teams and puts up barriers to new teams.

Indeed if revenue was shared today amongst the existing teams then how could a new squad break into the sport? I remember when a modest US squad slowly rose up the ranks from a development team in the US to become a pro team riding in Europe before being wooing ASO to land a wildcard for the 2008 Tour de France and today the team is known as Garmin-Cervélo and it has won four stages in the Tour de France this July. Jonathan Vaughters and Doug Ellis have achieved all this with impeccable marketing, decent ethics and a streak of fun. Remind me again, what’s not working here?

Tom: yes, Rabo have some international operations but their sponsorship is mainly about supporting competitive cycling in the Netherlands, from the pro team at the top to local clubs and grass roots racing.

Ave: quite, but it’s not so black and white. Jonathan Vaughters has been in touch via twitter to point out that he’d like a lot of the money shared to go on anti-doping costs.

Thanks for filling in the argument after your reaction earlier. Excellent articel.

One counteragument though for strengthening the positions of the teams. You’re using the example of Garmin-Cervelo for your argument that every team should be eligible for obtaining Pro Tour status.
I get your point, but if the licences are not worth a dime, it becomes difficult for teams to capitalize them and to obtain loans from banks and investors. In my opinion it should be more easy to buy and sell a license from another team. That means that teams should no longer be granted a pro tour status, but obtain ownership of pro tour licenses. Only then, teams can capitalize their status and thus can become more stable and so attract more sponsors. If others and new participants wants to join? That’s possible, but then they have to buy shares of the a licensed team. Or, for a few teams, they can earn temporarily promotion based on perfomances.

Note, that I am not saying that I am for or againts statuses/licences based on results etc. My point is, that for more teams the licenses themselves should become assets, not liabilities.

Money can always be earmarked, targeted for specific expenditures such as helping to defray the cost of certain expenses, and ruling out others. Riders’ salaries could be off the table. I’m sure there’s a nice long list of operating costs that are pretty consistent across teams, and have nothing to do with riders’ salaries. Maybe the teams could find sponsors more easily if the tab wasn’t quite so huge. I am waiting for the day (soon to come, I hope) when the image of cycling will be clean, and a lot of this scandal avoidance on the part of big name companies will be a thing of the past.

Disagree on a couple of points:
1. If you were to take the peleton as is and transplant it to a new race, with a decent course, and make sure the riders care and then pit that race against a TDF filled with riders I have never heard of, I know which race I would watch, and I think most other would too. In other words my attention is held by interest in the riders and teams, the tour is wonderful largely because all the best are there.

2. I am not sure that more money would be instantly channeled to increased riders salaries leaving the teams unstable. See dozens of examples of other sports with stable and even profitable teams some of them listed here. I think the current tight spot the teams find themselves in is due to a surge in the technological “arms race” to give riders an advantage. I wouldn’t expect this surge to repeat itself if the teams got more money.

I think the end argument is that in any business venture when two parties work together to produce a product one of them is always going to be unhappy if they are barely scraping by while the other is “sitting fat cow”.

Cycling & the ASO may want to take a leaf out of Formula 1’s book.
The F1 teams all get a percentage of the TV revenue based on their finishing position in the ‘constructors championships’. This would be the equivalent of the UCI ranking system.

What could also make this interesting is that the small F1 teams always try very hard to get a single ‘CC’ point as this equals significant revenue for them at years end.
The same could apply to Pro Teams, with the smaller teams trying to be a bigger part of the racing as there would be more incentive.

This article does a good job of identifying why the TDF doesn’t currently need to revenue share with the teams.

What the author appears not to have considered is the power (or lack in this case) of the athletes. They are the one’s breaking legs (or worse) and suffering day after day for our viewing enjoyment. Yes, they are professional, but no, they are not being compensated fairly for the spectacle they are creating.

In North American Sports the monopoly of leagues was only broken by unionization of the professional athletes, and now they get the lions share of the money. In football (soccer) there was no monopoly as there are multiple leagues competing on the open market, and again, the money goes to the athletes. Currently, events like the TDF and Olympics have so far resisted complensating the athletes on the scale of the spectacle they are creating. Like these other professional sports, that will eventually end, and I for one applaud it. While I thank profusely the TDF and Olympic organizers for creating such wonderful brands, they operate off of the backs and sweat of others without fairly compensating them, and that I do not support.

Author is an Olympian and thankful for the opportunity, but it was a hard, poor road.

A valid point is raised about ASO cross-subsidising other races with income from TdF. If the teams got their wish and TV money from TdF (and/or other races) then, almost by definition, ASO would be less profitable and as a result not able to afford to put on Paris-Nice, Dauphine etc. Would that be good for either the teams or the sport as a whole ?

Ben / Rooie: yes but you’re like me, the kind of people who look out for cycling blogs. The average fan doesn’t really follow the sport, the roadside viewer or the person who starts buying L’Equipe in July wants a show and doesn’t mind who the actors are.

Amateur Athlete: yes… but sport is very different in Europe. Britain aside and it’s never been so commercial. Plus the sport of cycling struggles to get organised, all previous attempts at rider unions collapsed within months.

What some of you are neglecting is that in the Tour the riders all have salaries, that the riders/teams are all eligible to win a share of prize money (over 2M Euros), and that depending on the team/sponsors, may have bonus structures in place. While they may not be earning 7 figures per year, they are hardly “Slaves of the Road” anymore.

One also needs to consider that leagues/circuits represent multiple events, whereas Le Tour is only 1 event. While the TDF may be the “richest” event in cycling, revenues pale in comparison to Football/Soccer, Basketball, F1 and many other sports.

JVs little standoff with the press (linked to above) is very short sighted. The sponsors are in the sport for exposure to the public; the tour offers greater opportunity than any other. He can protect Slipstream’s image rights as he sees fit, but if I were in the marketing department of the team’s sponsors, I’d be reconsidering less petulant options.

Which brings yet another point. Admission to the Tour is often cited as the raison d’être for the sponsorship teams get, due to the amount of potential exposure. If so, riders/teams need the Tour in order to exist. One could argue the teams and staff get paid all year, largely based upon 21 days in July.

JV’s argument about revenue sharing stabilizing the sport may have merit, but this is good for the teams, and not necessarily anyone else. If one wants more from the event organizers, they need to offer an incentive to them. At the moment, they don’t have firm ground to negotiate from.

If you’re doing analogies from other sports to cycling, then I suggest you look at the various brands of motor racing, rather than team sports that can take place in locations owned by the teams.

The teams seized control of Formula One (through FOCA) from the FIA (UCI equivalent) in the seventies / eighties. I honestly don’t know about North American motorsport or rallying, but I suspect that those are the correct comparison for cycling, rather than football (whether association, rugby or gridiron).

It does seem odd to me that bike manufacturers aren’t the primary team sponsors.

Whilst I don’t believe that Revenue sharing will ever happen with a sport like cycling, mainly because the structure of the whole sport and its revenues is all wrong for that to happen, I think a much more interesting idea was in the blog Jonathan Vaughters did about stabilising the sport through having a proper top division, based on performance, rather than on some mythical scoring system made up by the UCI. Unfortunately I can’t find the link but I remember the idea being that if teams knew that they were going to be invited to all the top races it makes it easier for them to attract good sponsors, who would get more exposure for their money.

Would also stop teams from just being created and then just appearing in the top tier, depriving teams who’ve been working towards getting to the Pro Tour for years of the reward for consistency and effort.

In a free market system, it is up to the business to determine it’s future – not political correctness, not moral obligation and not a socialist share-the-rewards mentality.

If the owners of TdF kill the golden goose through poor decision making and poor money management, then someone else will step in to fill the void. If someone else has a better deal and cycling moves away from TdF, so be it.

At this point, TdF is doing things right and the money flows. They are at the top of the food chain. We’re all benefitting, cycling is growing in popularity and there seems to be no shortage of teams or riders.

Mark: we’re in France where the state accounts for 55% of GDP. Even if the race was and is nakedly commercial, it is not a business. It’s a tourist advert, it gets huge subsidies from local and national government (eg towns bidding to host race, police protection etc) and it’s become a socio-cultural part of the French summer.

Where the market isn’t working is connecting sponsors and teams. Even the good teams are paying for the scandals with corporate backers staying away for the time being.